International Marketing

Universit Paris-Dauphine

Module- 1
The Scope and Challenge of International Marketing

McGraw-Hill/Irwin

2005 The McGraw-Hill Companies, Inc. All rights reserved.

Chapter Learning Objectives

1.
1. The
The changing
changing face
face of
of U.S.
U.S. business
business
2.
2. The
The scope
scope of
of the
the international
international marketing
marketing
task
task
3.
3. The
The increasing
increasing importance
importance of
of global
global
awareness
awareness
4.
4. The
The progression
progression of
of becoming
becoming aa global
global
marketer
marketer
5.
5. The
The importance
importance of
of the
the self-reference
self-reference criterion
criterion (SRC)
(SRC) in
in
international
international marketing
marketing

Global Business Trends

1.
1. The
The rapid
rapid growth
growth of
of
the
the
World
World Trade
Trade Organization
Organization
and
and regional
regional free
free trade
trade
areas,
areas, e.g.,
e.g., NAFTA
NAFTAand
and
the
the
European
European Union
Union

2.
2. General
General acceptance
acceptance of
of
the
the
free
free market
market system
system among
among
developing
developing countries
countries in
in
Latin
Latin
America,
America, Asia,
Asia, and
and
Eastern
Eastern
Europe
Europe

3.
3. Impact
Impact of
of the
the Internet
Internet
and
and
other
other global
global media
media on
on the
the
dissolution
dissolution of
of national
national
borders,
borders, and
and

4.
4. Managing
Managing global
global
environmental
environmental resources
resources

Internationalization of U.S. Business

Increasing
Increasing globalization
globalization
of
of
markets
markets

Firms
Firms face
face competition
competition
on
on
all
all fronts
fronts

Many
Many U.S.
U.S. companies
companies
are
are
now
now foreign
foreign controlled:
controlled:

U.S.
U.S. firms
firms seeking
seeking
foreign
foreign
markets
markets to
to increase
increase
profits
profits

Carnation
Carnation (Swiss),
(Swiss),
Daimler-Chrysler
Daimler-Chrysler (German)
(German)

International Marketing: A Definition

International
International marketing
marketing is
is defined
defined as
as the
the
performance
performance of
of business
business activities
activities designed
designed to
to plan,
plan,
price,
price, promote,
promote, and
and direct
direct the
the flow
flow of
of aa companys
companys
goods
goods and
and services
services to
to consumers
consumers or
or users
users in
in more
more
than
than one
one nation
nation for
for aa profit
profit
Marketing
Marketing concepts,
concepts, processes,
processes, and
and principles
principles are
are
universally
universally applicable
applicable all
all over
over the
the world
world

I. The nature of
international marketing
International marketing consists in identifying and
satisfying consumer needs abroad; better than the
national and international competitors, under the
constraints of the internationalization stage of the
firm and the global environment. (Nathalie Prime)

Key elements of the

international marketing mix
Product

Price

Place

Promotion

-Product
adaptation
packaging and
labeling
translation of
technical
literature
-Quality
management
-Licensing and
contract
manufacturing

-choice of pricing
strategy
-Competitor
analysis
-Discount
structures
-Credit
management
-Delivery terms
-costing and
budgeting

-International
distribution
-Control of
agents
-Export
documentation
-cargo
insurance
-Joint-ventures
and subsidiaries

-Advertising,
public relations
and sales
promotion
-Direct marketing
-Control of
salespeople
-Translation of
sales literature
-Exhibiting
-Marketing
research

Differences between domestic and

international marketing
Domestic

International

Research data is available in a

single language and is usually
easily accessed

Research data is generally in foreign

languages and may be extremely
difficult to obtain and interpret

Business is transacted in a single

currency

Many currencies are involved, with

wide exchange rate fluctuations

Head office employees will

normally possess detailed
knowledge of the home market

Head office employees might only

possess and outline knowledge of the
characteristic foreign markets

Promotional messages need to

consider just a single national
culture

Numerous cultural differences must

be taken into account

Market segmentation occurs within

a single country

Market segments might be defined

across the same type of consumer in
many different countries.

Differences between domestic and

international marketing (continued)
Domestic

International

Communication and control are

immediate and direct

International communication and

control might be difficult

Business laws and regulations are

clearly understood

Foreign laws and regulations might

not be clear

Business is conducted in a single

language

Multilingual communication is
requires

Business risks can usually identified

and assessed

Environments may be so unstable

that it is extremely difficult to identify
and assess risks

Planning and organizational control

systems can be simple and direct

The complexity of international trade

often necessitates the adoption of
complex and sophisticated planning,
organization and control systems

Differences between domestic and

international marketing (continued)
Domestic

International

Functional specialization within a

marketing department is possible

International marketing managers require a

wide range og marketing skills

Distribution and credit control are

straightforward

Distribution and credit control may be

extremely complex

Selling and delivery

documentation is routine and
easy to understand

Documentation is often diverse and

complicated due to meeting different
border regulations

Distribution channels are easy to

monitor and control

Distribution is often carried out by

intermediaries, so is much harder to
monitor

Competitors behavior is easily

predicted

Competitors behavior is harder to observe,

therefore less predictable

New product development can be New product development must take

geared to the needs of the home account of all the markets the product is
sold in.

The International Marketing Task

Foreign Environment
(Uncontrollables)
7. Structure of
Distribution

1. Competition
Domestic environment
(Uncontrollables)

Environmental
uncontrollables
country market A

(Controllables) 1. Competition
Price
Product
2. Technology
Target
5. PoliticalEnvironmental
7
Market
Legal
uncontrollables
6. Geography and
country
Promotion Place or 2 .Technology
Infrastructure
market B
Distribution
4.
Culture
Environmental
3. Economy
uncontrollable
5. Political3. Economy
s
Legal
country
market C
4.
Culture

Environmental Adaptation Needed

Differences
Differences are
are in
in the
the uncontrollable
uncontrollable environment
environment of
of
international
international
marketing
marketing
Firms
Firms must
must adapt
adapt to
to uncontrollable
uncontrollable environment
environment of
of
international
international
marketing
marketing by
by adjusting
adjusting the
the marketing
marketing mix
mix (product,
(product, price,
price,
promotion,
promotion, and
and distribution)
distribution)

Continuum
Adaptation
(of Marketing Mix)

Standardization
(of Marketing Mix)

INFLUENCED BY 7 ENVIRONMENTAL FACTORS

Self-Reference Criterion (SRC)

and Ethnocentrism:Major
Obstacles
SRC is an unconscious reference to ones own cultural
values, experiences, and knowledge as a basis for
decisions
Ethnocentrism refers to the notion that ones own culture
or company knows best how to do things
Both the SRC and ethnocentrism impede the ability to
assess a foreign market in its true light
Reactions to meanings, values, symbols, and behavior
relevant to our own culture are different from those of
foreign
Relying on ones SRC could produce an unsuccessful
marketing program

Avoiding the Self Reference Criterion

To
To avoid
avoid the
the SRC,
SRC, the
the following
following steps
steps are
are suggested:
suggested:
1: Define the business problem or goal in home-country
cultural traits, habits, or norms
2: Define the business problem or goal in foreign-country
cultural traits, habits, or norms. Make no value
judgments
3: Isolate the SRC Influence in the problem and examine it
carefully to see how it complicates the problem
4: Redefine the problem without the SRC influence and
solve for the optimum business goal situation*

Developing a Global Awareness

To
To be
be globally
globally aware
aware is
is to
to have:
have:
1. Tolerant of Cultural Differences, and

2. Knowledgeable of:
(a) Culture, (b) History, (c) World Market Potential,
(d) Global Economic, Social and Political Trends

Stages of International
Marketing
Involvement
In general, firms go through five different phases in going

In general, firms go through five different phases in going

international:
international:
No
No Direct
Direct Foreign
Foreign Marketing
Marketing
Infrequent
Infrequent Foreign
Foreign Marketing
Marketing
Regular
Regular Foreign
Foreign Marketing
Marketing
International
International Marketing
Marketing
Global
Global Marketing
Marketing

Strategic Orientation: EPRG Schema

Orientation

EPRG Schema

Domestic Marketing
Extension

(Ethnocentric)

Multi-Domestic
Marketing

(Polycentric)

Global Marketing

(Regio/Geocentric)

Strategic Orientation: EPRG Schema

Generally, four distinctive approaches dominate strategic thinking in
international marketing:

1. Ethnocentric or Domestic Marketing Extension Concept:

Home country marketing practices will succeed elsewhere

without adaptation; however, international marketing is
viewed as secondary to domestic operations
2. Polycentric or Multi-Domestic Marketing Concept:

Opposite of ethnocentrism
Management of these multinational firms place importance
on international operations as a source for profits
Management believes that each country is unique and
allows each to develop own marketing strategies locally

Strategic Orientation: EPRG Schema

Generally, four distinctive approaches dominate strategic thinking in
international marketing:

3. Regiocentric:

Sees the world as one market and develops a standardized

marketing strategy for the entire world
4. Geocentric:

Regiocentric and Geocentric are synonymous with a Global

Marketing Orientation where a uniform, standardized
marketing strategy is used for several countries, countries in
a region, or the entire world

International marketing
and exporting
International marketing is more than exporting,
because it involves:
Marketing products that have been
manufactured or assembled in the target country
Establishing a permanents presence in the
foreign country
Licensing and franchising
Sourcing components from foreign states.

International and
multinational marketing
International marketing means
marketing across national frontiers.
Multinational marketing means the
integrated coordination of the firms
marketing activities throughout the
world.

2. Reasons for marketing

abroad
Economies of scale and scope
Existence of lucrative markets in foreign
countries
Saturated markets in the home country
High R&D costs
International opportunities
Less competition
New trade agreements

3. Exporting
Exporting means the sale in a foreign
market of an item produced, stored or
processed in the supplying firms home
country.
Two kinds of exporting: passive and
active

3. Exporting (continued)
Sources of foreign demand (passive exporting):
Non-availability of appropriate products from
domestic producers
Price differentials between imported and locally
supplied items;
Exotic images attaching to foreign products;
Inefficiency of local distribution systems, political
disruptions, industrial action, or other factors that
prevent local firms from supplying goods.

Exporting (continued)
Reasons for active exporting:
The product has reached the end of its
life cycle at home
Less competition
Easy access to major customers
Export increases turnover.

Example: Manchester
United
MUFC has more fans abroad than at
home
Merchandising: clothing, shoes, sports
equipment
Manchester United Magazine,
Manchester United on Video
TV Channel - MUTV

II. Strategic considerations

in international marketing
Strategy means choosing a general direction for
the firm, together with organizational designs,
policies, systems and a style of management
best suited for beating the competition in the
field.
Tactics concern practical methods for
implementing strategic decisions.

1. Competitive advantage
The elements of competitive advantage are the
critical offer, the significant operating factors
and the firms strategic resources.

Critical offer features

Strategic resources
Significant operating factors

Competitive advantage

Porters model of
competitive advantage

Cost leadership
Differentiation
Specialization

2. The competitive
environment
Factors:
Ease of entry by competitors into the market
The bargaining power of customers
The bargaining power of suppliers
Availability of substitutes
Level of existing competitive pressure

The Porter Model

The Porter Model
Availability of substitutes

Bargaining power of
Customers and suppliers

Competitive situation
Profitability
Market power
Nature of competitive advantage

Ease of entry

Extent of inter-firm
competition

Competition between
nations
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The national diamond (Porter, 1990)

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4. The value chain

Primary activities:
Inbound logistics
Operations - the conversion of inputs
into products
Outbound logistics - which concern
distribution
Marketing and sales
Service activities

III. International marketing

strategy
1.

The five stage model

Stage 1: Decision to internationalize

Stage 2: Analysis of international marketing environment

Stage 3: Entering international markets

Stage 4: International marketing programme

Stage 5: Implementing the international marketing programme

2. International marketing
planning
Planning means looking into the future
and deciding today what to do in the
future given predicted or intended
circumstances.

What if analysis
Management asks the question what will
we need to do if it happens? and
makes sure that the firm is adequately
prepared for the environmental change.
What if analysis recognizes
complexities, discontinuities and
uncertainties of the real world.

4.Control and coordination

Control:
Establishing standards and targets
Monitoring activities and comparing
actual with target performance
Implementing measures to remedy
differences

4. Coordination and
control
Coordination means the unification of
effort, i.e. ensuring that everyone within
the enterprise is working towards a
common goal. Effective coordination
requires efficient control.

Mechanistic systems of
control
Standardization of administrative
procedures
Feedback systems (reports)
Face-to-face meetings
Appointment of a full-time liaison
manager

Cultural systems of control

Clear corporate vision and mission;
Free-following communication between
the workforce and management
Good internal PR and internal
marketing
Good induction procedures for new staff
to adopt the corporate culture at an
early stage